Intesa's bid, one of the largest bank takeover offers in Europe in more than a decade, triggered a surge in banking stocks on Tuesday fuelled by expectations that much-needed consolidation could help create a core of stronger lenders.
However UBI Banca's initial reaction was cautious and Chief Executive Victor Massiah said it was too early to give a definite response to what for the moment was only a proposal.
In a letter to staff, he said the proposal "must pass through a complex authorisation process by regulators and approval by shareholders, which cannot be taken as a given."
Intesa Sanpaolo said that while the all-paper offer was not technically a friendly bid as it had not been possible to coordinate with UBI beforehand, it did not regard the approach as hostile and hoped to come to an agreement.
"I have maximum respect for the board of UBI so they will make the evaluations they consider appropriate," Intesa Sanpaolo Chairman Gian Maria Gross-Pietro said on Wednesday as the UBI board meeting was going on.
After an embarrassing leak in 2017 of an internal study of a possible tie-up with insurer Generali, Intesa managed to keep the complex deal secret.
CEO Carlo Messina said on Tuesday he had hatched the plan, which also entails the sale of branches and assets to regional bank BPER Banca for antitrust reasons, with Mediobanca's star investment banker Francesco Canzonieri.
Asked by reporters outside the meeting at UBI Banca's Milan headquarters whether the board considered the offer hostile, board member Ferruccio Dardanello said: "Surprising. I think it surprised everyone."
PUSH TOWARDS MERGERS
If approved, the deal would create the euro zone's seventh-largest bank by assets, focused on wealth management and insurance and in charge of more than 1.1 trillion euros in customers' financial assets.
Messina said Intesa was proud to have been the first European bank to yield to the European Central Bank's calls for consolidation.
Broker Equita said the move was "somewhat defensive" because UBI's strong franchise and low valuation could have drawn interest from foreign players already present in Italy.
As the strongest among second-tier lenders, UBI had also been tipped as a potential buyer for Monte dei Paschi di Siena, which the state must re-privatise next year.
Economy Minister Roberto Gualtieri welcome signs of consolidation and said that for the Tuscan lender "a market solution will be reached within the foreseen time frame".
Monte dei Paschi shares rose sharply on Wednesday and were trading 8% higher by 1408 GMT while the Italian banking index rose 0.5%. <.FTITI8300>
Equita analyst Giovanni Razzoli said Banco BPM was the main beneficiary of the sector's increased M&A appeal.
Banco BPM, whose chief executive last year said a tie-up with UBI would make sense, said the bank would continue with its standalone plans, while the head of Italy's largest bank, UniCredit ruled out any moves.
"Let me reconfirm we have NO intention to do any M&A and we will not be drawn into any transactions," CEO Jean Pierre Mustier said in a message to staff on Wednesday.
($1 = 0.9258 euros)
By Andrea Mandala